Energy

Orion Power Holdings, a joint venture of BGE and a New York investment firm, announced yesterday that it is purchasing 72 hydroelectric generating plants in Syracuse, N.Y., for $425 million.

In March, Baltimore Gas and Electric Co. and Goldman, Sachs & Co. formed Orion in order to buy power plants in response to deregulation and quickly changing competition.

The deal announced yesterday is the first major purchase by Orion, and involves 72 plants from Niagara Mohawk Power Corp.

Lori Scheiner, an Orion spokeswoman, said the plants are well-maintained and the purchase "was a good opportunity for Orion to develop its portfolio of assets."

States with high energy costs, such as New York and California, are requiring utility companies to divest themselves of plants in the name of competition. Meanwhile, many energy companies are getting rid of their generating assets and focusing on distribution and transmission.

Such is the case with Niagara.

"Now the generating business is competitive and for a long time it wasn't," said Nicholas Ashooh, Niagara's vice president for communications and government affairs. "We made a strategic decision that it was not a business we were going to be competitive in."

The sale price represents 1.7 times Niagara's book value. Ron Tanner, an industry analyst at Legg Mason Wood Walker Inc., said plants are typically sold at between 1.5 and 3.5 times their book value.

"Given that it's hydroelectric, the book value is probably understated because it's older and has depreciated," he said. "You wouldn't expect the book value to be very high."

The deal stipulates that through September 2001, Niagara will buy more than 2 million megawatt hours of electricity annually from Orion for about $81 million a year. If Orion produces more energy, it can be sold on the open market, Ashooh said.

After 2001, the responsibility of marketing the power will go to Constellation Power Source, a wholly owned subsidiary of BGE.

Niagara's 72 plants have a capacity of 661 megawatts of electricity -- enough to supply power to 200,000 homes.

Orion also recently acquired Carr Street Generating Station in Syracuse, which has a capacity of 105 megawatts.